Monday, July 17, 2017

Our Disneyland Economy

Disneyland is known as a place “where dreams come true” and where
every story always has a happy ending. But there is going to be no
happy ending for the U.S. economy.
Wishful thinking has resulted in one of the greatest stock market
rallies in history in recent months, but like all childhood fantasies,
it won’t last. The real economy continues to deteriorate, and we can
see this even right outside of the gates of Disneyland. Every night growing numbers of homeless people
sleep on the pavement just steps away from “the happiest place on
Earth”. It can be fun to “play make believe” for a while, but
eventually reality always catches up with us.

Without a doubt, the stock market has been on a tremendous run.
Since Donald Trump’s stunning election victory in November, the market
has been setting record high after record high, and it is now up a total
of 17 percent…

The Dow Jones Industrial Average recorded its 23rd all time high of 2017 yesterday closing at 21,532.
There have been a total of 120 days where the markets have closed
since President Trump’s inauguration on January 20th. The ‘DOW’ has
closed at all time highs 23 of those days for nearly 20% or one-fifth of
the days the market has been open. The market is up 9% since the inauguration.

Since the election on November 8th the DOW has closed at record highs
an amazing 40 times! Nearly one-fourth or 24% of the 168 days the
markets have closed have been record highs since the November 8th
election. The market is up 17% since the election!

If this surge was supported by hard economic data, that would be
something to greatly celebrate, but that has not been the case at all.

Instead, stock prices have become completely disconnected from
economic reality, and now we are facing one of the greatest stock
bubbles of all time. As Graham Summers has pointed out, stocks are now trading at price to sales ratios that we haven’t seen since the very height of the dotcom bubble…

Earnings, cash flow, and book value are all financial
data points that can be massaged via a variety of gimmicks. As a result
of this, valuing stocks based on Price to Earnings, Price to Cash Flow,
and Price to Book Value can often lead to inaccurate valuations.

Sales on the other hand are all but impossible to gimmick. Either
money came in the door, or it didn’t And, if a company is caught faking
its sales numbers, someone is going to jail.So the fact that stocks are now trading at a P/S ratio
that matches the Tech Bubble (the single largest stock bubble in
history) tells us that we’re truly trading at astronomical levels:
levels associated with staggering levels of excess.

Looking with fresh eyes at the economic numbers and
central bankers’ statements convinced me that we will soon be in deep
trouble. I now feel that it’s highly likely we will face a major
financial crisis, if not later this year, then by the end of 2018 at
the latest. Just a few months ago, I thought we could avoid a
crisis and muddle through. Now I think we’re past that point. The key
decision-makers have (1) done nothing, (2) done the wrong thing, or (3)
done the right thing too late.

Having realized this, I’m adjusting my research efforts. I believe a
major crisis is coming. The questions now are, how severe will it be,
and how will we get through it?

The vanishing benches were Anaheim’s response to
complaints about the homeless population around Disneyland. Public work
crews removed 20 benches from bus shelters after callers alerted City
Hall to reports of vagrants drinking, defecating or smoking pot in the
neighborhood near the amusement park’s entrance, officials said.

The situation is part of a larger struggle by Orange County to deal with a rising homeless population. A survey last year placed the number of those without shelter at 15,300 people, compared with 12,700 two years earlier.

And in New York City, street homelessness is up 39 percent over the past year.

This is where the real economy is heading, but a rising stock market makes for much happier headlines.

Many major cities around the nation are passing laws to essentially make it illegal
to be homeless. Forcing homeless people to go somewhere else may mask
the problem for a while, but it certainly doesn’t do anything to solve
it. In my new book entitled “Living A Life That Really Matters”,
I talk about how real love is not just about loving those that are just
like us. Rather, real love is about caring for people no matter what
they look like and no matter what they are going through.

Unfortunately, the economic suffering that we are seeing right now is just the beginning.

Just like in 2008, the major financial crisis that is coming is going
to greatly accelerate our economic problems. And just like last time,
millions of people are going to lose their jobs, and millions of people
are going to lose their homes.

Homelessness is already worse in many parts of the nation that it was
during the depths of the last recession, and what we are going to see
during the next economic downturn is going to be absolutely
unprecedented.

So don’t look down on those that need a helping hand, because in the
not too distant future you may find yourself needing some help.